Shanghai Tang: The First Global

Chinese Luxury Brand?

Case Analysis

Group-V

Aayush Upadhyay 190103003

Abhinav Ahuja 190103204
Anusha Mukherjee 190101026
Aparna Mohapatra 190103031
Adhip Pandita 190103009
Anupama Samanta 190103029
Akshat Narayan 190103020
Q1 How luxury brand is different from a regular, mass-market brand? How does one
build a luxury brand? How important is brand extension for increasing brand
awareness?
To understand how a luxury brand is different from a regular, mass-market brand and what
set of activities one may need to perform in order to build a luxury brand, we will need to
understand and analyze the 4Ps of any luxury brand:

Price:
One thing that a luxury brand is not is cheap. Pricing of luxury brands are always higher than
the regular brands. This price is often justified by what luxury brands stand for: quality,
technique of manufacturing, experience in manufacturing, country of origin, status-symbol,
etc.
In fact pre-owned luxury products reselling markets have also resurfaced and they are often
more expensive than the regular branded new products.
A normal hand bag in USA costs anywhere around $100 or
$200 at the max. But here on the right is a pre-owned bag
from Louis Vuitton, which is the largest luxury brand
manufacturer of personal items. The pre-owned markets of
luxury products, the grey markets, the replicas of luxury
product are both the cause and consequence of high pricing.

Product:
The luxury market products give a unique and bold statement that defines “this is who I am”.
They often have a story behind them that connects and resonates with people. Customers
often do not pay for the utility but when purchasing luxury products they are paying for the
experience and have the satisfaction of the association with the brand. Brands represent their
products as larger than life where the lines between fiction and reality are blurred. The
products create an aspirational group that majority would like to be a part of, but cannot due
to one reason or the other.
The products are usually well decorated, designed and created using techniques different than
mass product markets. The process behind their creation is often either advertised or put out
through one way or the other in public domain. For wines and alcohols, the bottle designs and
packing are done in a way that exhibits exclusivity. Expensive jewelry and watches often are
seen sponsoring major sports.
Customization of the products is also done in order to provide the customers a sense of
unique ownership. For example, Rolls Royce would customize even the roof of the cars with
optical fibres to give an impression of the starry nights. One customer had got the stellar
structure made the exact same way as on the night he was born.

Place:
Place is very important pillar of luxury brands. Place of origin is highly influential in the
perception of luxury brand among the customers or people in general. Europe is famous for
its luxury brands and many of them have an association with France and Italy.
Developing markets often face the brunt of it. As the perception of luxury not only comes
from the price but also the quality, and anything that comes from developing market has the
perception of “cheap” or low-quality product. Asian luxury brands often find the competitive
grounds uneven and more challenging.
Another dimension of this is the place where the product is being sold. Generally really
luxurious brands do not sell on common e-platforms like Amazon. They have their own
direct-to-consumer (D2C) channels. This has a lot to do with the perception of the brand.
Luxury cars would have their exclusive showrooms, great after-sales services, robust
customer relationship mechanisms etc.

Promotion:
Marketing rules are reversed when it comes to luxury brands. Instead of huge number of
buyers, there are a selected number of buyers with whom the ideology matches, and the
brand’s promotion should help people amplify what they stand for and what they want to be
perceived as. Replacing real personas with fictional ones, and giving their advertisements the
look of work of art and staging those in remote or fictional place with abstract story-telling
and at the same time it also leaving room for the audience to interpret what it is has worked in
favor of luxury brands.
Every communication from luxury brands exhibit the brand values and perception. The
spacious or empty-looking showrooms and wide shelf spaces create a sense of scarcity and
exhaustive products and thus command the price. Same is seen in newspaper ads, bill-boards
ads, and even in the communication by showroom salesmen.
Finally there is a need to extend the brand to create brand awareness but what should be kept
in mind are the limits. Their exclusivity comes from the perception of the exclusivity. Luxury
brands can run into the risk of being perceived as only expensive and not-so-luxury brand if
the reach increases. They run into the risk of being perceived as mass product brand if in
order to increase brand awareness, the brand is made accessible to all. What drives the desire
of ownership is the elite club which has the ownership. This has successfully been done by
the Rolls-Royce. Even with the money, one may not be able to purchase a Rolls Royce. Rolls
Royce has been known to refuse the products to customers after the customer did not qualify
or deemed fit to own a Rolls Royce and an example of this has been Indian actress Malika
Sherawat who was denied the Rolls Royce.
Traditionally this is what luxury means to the people:
 Economically: Pricing and Value
 Socially: Status and Exclusivity
 Psychologically: How the brand makes you feel special

Overall, customers do relate the following with the Luxury brands and thus brands need to
keep them in their mind and communication:
Self Esteem: For some consumers, luxury purchase can go a long way in increasing their
self-esteem and providing them a sense of belongingness.
Sense of accomplishment: They want to reward themselves of their hard work by treating
themselves with something they usually cannot afford.
To reach masses, Luxury brands cannot afford to compromise on these perceived values.

Q2 What are the strengths and weaknesses of Shanghai Tang’s existing personality and
image?
Shanghai Tang intended to become the first Global Chinese brand which combined the
Chinese culture with the dynamic trends of the world and bring the luxuries of China to the
rest of the world. Their vision was to be the quintessential Chinese fashion brand which
showcases the unique and flamboyant element of style that the heritage of China carries.
The strengths of Shanghai Tang’s brand image were:
 The brand intended to give the customers a ‘Chinese lifestyle’ with their range of
products like watches, bedding, albums and others all under one roof
 It incorporated the rich culture of China in the fashion world
 It proudly carried the “Made in China” to tell the world about China and its heritage
 They were backed up by Richemont – European luxury brand, which helped them in
ensuring its quality to the world as products from China were considered as low on
quality
 Their larger than life stores at best locations which illustrated their luxurious and rich
nature associated with their brand

The Weaknesses that Shanghai Tang’s brand personality had were:

 They were too traditional for the world i.e. people from places like New York did not
associated these products as luxury and in turn went to local China markets for similar
type of products
 It became confusing for non-Chinese customers as they could not understand the
diverse style ranging from pre-revolutionary to cultural revolution and did not
understand these mismatching trends
 Availability of low-cost variants to Shanghai Tang were easily available in local
markets and thus it diluted the luxurious pricing of the brand in the global forum

Q3 What might have accounted for Shanghai Tang’s unsatisfactory results in building a
global luxury Chinese brand? What could they or should they have done differently?

 Rapid expansion plans undertaken by David Tang - The conceptualization of the

Shanghai Tang’s brand was based on the premise that China will emerge as the largest
economy of the world so it is the right time to launch a Chinese brand. The company
rapidly expanded in several new locations such as New York, London, and other Asian
Cities. There was no research done before to establish the consumer perception towards
the Shanghai Tang brand.

 Overestimation of American consumer perception – While American consumers like

the Chinese tradition but the kind of fashion apparels that Shanghai Tang creates were not
something the American consumers would like to wear.

 Confusion amongst the consumers – Shanghai Tang kept the traditional and modern
Chinese apparels in the same store. Due to that the differentiating factor of Shanghai
Tang i.e. the traditional Chinese apparels reflecting Chinese heritage was lost in front of
wealthy American Consumers.

 Availability of low-price alternatives – It was difficult to justify the high-priced

offerings of Shanghai Tang as cheaper alternatives were readily available elsewhere.

 Risk of alienating potential customers – Shanghai Tang banked on the cultural heritage
of China to sell its products. But for Asian consumers this image was less appealing as a
 result it was not able to gain much attention in countries like Japan which have a taste
towards luxury apparels from Italy and France.

 Traditional appeal not a right fit with young Chinese women – Young Chinese
women wish for modern, elegant, and stylish outfits. The traditional Chinese wear remind
them of their grandmothers.

Things that could have been done differently to gain greater global presence

 Shanghai Tang should have started with its focus only in China. This would have
given the brand much needed recognition at the early stage of its inception. After
harnessing initial awareness about the brand, it should have gone for global market.

 Shanghai has positioned itself as a brand that presents Chinese heritage in modern
way. This positioning created confusion amongst the American consumers as well as
the focus on traditional positioning did not go well with the Chinese customers.
Shanghai Tang should have focused on the traditional approach for other offerings
except the apparel segment. For apparel segment they should have focused more on
the modern approach in line with the latest fashion trends.

Q4 Do you think any Indian luxury fashion brand has potential to go truly global?
Explain.

Yes, as a group we believe Indian Luxury fashion Brands have the potential to go truly global
because of the following reasons
 Indians have a significant presence in the most of the worlds developing and
developed countries providing a good customer base for all around the world. Other
than these Indian Customer base there is growth in Global customers wanting Indian
Products such as Sarees, Bangles etc
 With India expected to be the hub of all global companies in the near future due to
tension with China there is a huge opportunity of funding for the home-grown labels.
 Fashion Brands like Sabyasachi have had huge rise in demand with the help of the
promotion that it has got due to Bollywood actresses
 The boom in India’s Entertainment Industry can also one of the major drivers for the
brands to go global so to meet customer demands.
 Tourism Industry will also be one of the top contributors in the brands going global as
the tourist and particularly yoga tourist that come to India want to buy products that
they see being used in India .